Here at Americans for Annuity Protection (AAP) we are driven to provide consumers unhindered and informed access to all annuities in a comprehensive and diverse marketplace. We also want to ensure a well-regulated annuity market that is safe for consumers and provides them with accurate information in an unpressured environment to decide if an annuity is right for them or even if it is the right time to purchase an annuity.
Senator Warren’s latest rationale to probe 15 carriers’ incentive programs is political theater posing as public interest. At encyclopedia.com we are told that bias in studies can result from “selection effects (e.g., the sampling plan leaves out a sub-group, over represents a subgroup, or has more complete follow-up for a subgroup [the healthy worker effect]).” Senator Warren hits on the first two by:
- Ignoring other financial incentive programs – Assets Under Management (AUM) bonuses for reaching specified levels of AUM, incentive programs in place at other investment institutions (e.g., Edward Jones click here for a description); and
- Focusing on the group of 15 when there are hundreds of annuity insurance companies, banks, and credit unions offering annuities.
Whether she is guilty of the third we shall have to wait for the follow-up. After reading an article this week in The Wall Street Journal, James Taranto discussed polling and explained a behavioral tendency called “confirmation bias” which he described as the tendency to pay more attention to information consistent with one’s preconceptions than that at odds with them. We shall have to wait for the Senator’s follow up to see if she will allow confirmation bias to inform her conclusions. Call us skeptical based on the rhetoric used to defend the probe.
If we are concerned incentive programs motivates bad recommendations that aren’t in the client’s best interest, let’s look at a substantive and unbiased study on all forms of compensation and incentive programs. Or maybe we should be honest and acknowledge we are just trying to prop up an agency’s rickety proposal that has seen support deteriorate day by day. Instead the Senator is on a targeted probe based on assumptions and her staff’s own biased and selective “study.”
Because bias has the tendency to jeopardize study results, validity and conclusions it can lead to bad policy. Bad policy only ends up harming consumers. So let’s do this right without bias and preformed conclusions.
AAP asks, why do we conclude before analysis that incentive programs by their very nature produce bad behavior? In fact how can we conclude that when these programs have been around for decades if not longer and annuity owners are consistently satisfied with their policy? If incentivized sales produced bad sales where are the unhappy customers? Study please?
Incentivizing salespeople (or any employees for that matter) is a $76-billion industry. It is not used exclusively in selling fixed indexed annuities. In fact incentive programs can be found in almost all American businesses and government agencies. The benefits to the company is increased loyalty, productivity, motivation, and morale. The benefit of a trip or awards ceremony is increased professional networking, training opportunities, new product introductions, sharing business strategies and addressing business challenges. But don’t take our word of the importance of these programs, take a one of Senator Warren’s colleagues, Senator Dick Durbin. While the statement was made at the turn of the decade, it is not doubt true today:
Virtually every successful business that you have a chance to analyze or get to meet the leaders of will tell you that the reason for their success is the people that work there. They can have the best technology in the world, but if they don't have a creative, hard-working, inspired workforce, they are not going anywhere.1
And it would be very bad indeed for consumers who want to purchase investment and insurance products if the companies who offered them “weren’t going anywhere.”
1 THE EFFECTIVENESS OF FEDERAL EMPLOYEE INCENTIVE PROGRAMS” which was formed to explore whether the Federal Government has the right programs in place to attract, retain, and motivate a world-class workforce.